Ollie's Bargain (OLLI) Rides on Business Model, Customer Reach
Ollie's Bargain Outlet Holdings, Inc. OLLI continues to excel due to its unique business model of "buying cheap and selling cheap." This approach, combined with cost-containment efforts, a focus on store productivity and the expansion of its customer loyalty program, Ollie's Army, has solidified its position in the market. The company’s success can be attributed to its ability to offer compelling deals that resonate well with consumers. No wonder, Ollie's Bargain’s favorable vendor relationships are also a key to growth.
Business Model Resonates Well With Customers
Ollie's Bargain’s focus on value-driven merchandise assortments positioned it well to capitalize on opportunities in the marketplace and effectively meet consumer demand. Ollie's Army continued to be a major sales driver, with membership increasing continuously. The company ended the second quarter of fiscal 2023 with 13.5 million active Ollie's Army members, which accounted for slightly more than 80% of sales.
Ollie's Bargain’s commitment to providing brand-name and closeout merchandise at attractive price points has resulted in favorable responses from customers. The company remains steadfast in its commitment to delivering superior deals, enhancing operating margins and expanding its store network. Ollie's Bargain stands to benefit from a favorable closeout environment and increased trade-down activity, aligning with its growth objectives.
This Zacks Rank #1 (Strong Buy) company has set ambitious targets for fiscal 2023, with net sales projected between $2.076 billion and $2.091 billion, marking a significant increase compared to the $1.827 billion reported in fiscal 2022. Ollie's Bargain also anticipates a robust improvement in comparable store sales in the range of 4-4.5%, a noteworthy turnaround from the 3% decline reported in the previous fiscal year.
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Store Growth Opportunities
In terms of store expansion, Ollie's Bargain plans to have more than 1,050 stores in the long run, aiming to open 50 to 55 stores annually. Ollie's Bargain increased its store base at a CAGR of 11.5% from 303 stores in fiscal 2018 to 468 stores in fiscal 2022.
In the preceding two fiscal years, Ollie's Bargain opened 40 and 46 stores, respectively. Looking at fiscal 2023, the company plans to open 45 new stores, offset by one closure, and remodel 30 to 40 stores. Management's strategy for the year includes opening 23 new stores in the third quarter.
Importantly, Ollie's Bargain's new store real estate model prioritizes flexibility and focuses on the store size between 25,000 and 35,000 square feet. The company targets new store sales of about $4 million in the first full year of operations.
Wrapping Up
Ollie's Bargain’s strategic endeavors position the stock firmly for growth. Based in Harrisburg, PA, the company has defied industry trends, with its stock rallying by an impressive 52.5% year to date against the industry's 27.8% decline.
3 More Stocks Looking Hot
Here, we have highlighted three other top-ranked stocks, namely Ross Stores ROST, Grocery Outlet GO and Walmart WMT.
Ross Stores, which operates off-price retail apparel and home fashion stores, currently sports a Zacks Rank #1. ROST has a trailing four-quarter earnings surprise of 11.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7.1% and 19.4%, respectively, from the year-ago reported numbers.
Grocery Outlet, an extreme value retailer of quality, name-brand consumables and fresh products, currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales and earnings suggests growth of 11.2% and 4.9%, respectively, from the year-ago reported numbers. GO has a trailing four-quarter earnings surprise of 14.3%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings implies growth of 5% and 2.2%, respectively, from the year-ago reported numbers.
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